Will we see mid-generation console refreshes again? | This Week in Business

This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check back every Friday for a new entry.

Here's a fun fact. The Xbox One had been on shelves for barely two and a half years when Microsoft announced its mid-cycle refresh, the Xbox One X, at E3 2016 under the name "Project Scorpio."

The Xbox Series X|S has now been on shelves for almost two and a half years, so maybe it's about time to start wondering when we're going to see an Xbox Series Z, or whatever unhinged naming convention Microsoft's marketing team is cooking up. Then again, perhaps not.

Yup, it's one of those columns.

To save a bunch of time, the answer to the headline question here is "I don't know," and I will be burning through a lot of words weighing the merits of a few different answers to the question before ultimately shrugging my shoulders and resorting to an utterly weak sauce "Time will tell" conclusion.

If that's not your bag, by all means skip to the quotes-and-stats recap part of the column or just close the browser tab entirely. I won't take it personally.

Before we break down some of the possible answers below, we should specify what we mean here by a mid-cycle refresh. For the purposes of this column, we're not talking about a simple console redesign or something with a larger hard drive. We're talking about a significant boost to the specs that will be marketed as the main reason to buy one. We mean the PS4 Pro, not the PS4 Slim, the Xbox One X, not the Xbox One S.

With that out of the way, let's look at the scenarios for whether we're going to see another mid-cycle refresh.

Yes, but not for a while yet

This answer is my gut reaction to the question. It just doesn't feel like we're far enough into this console cycle to toss aside the PS5 or Series X in favor of a shinier version of the same, does it?

Yes, we're just a few months away from the same point of the last console cycle where Microsoft announced what would become the Xbox One X, but the lay of the land has changed significantly, and a few points seem worth calling out.

First, Microsoft is doing better this cycle than it was last time around, when it got off on the wrong foot with its TV- and sports-heavy reveal, always-online DRM policies (abandoned after vociferous outcry), and a mandatory Kinect in every system that inflated the price of the hardware $100 above Sony's PlayStation 4. The PS4 outperformed Xbox One handily in the early goings, with Sony announcing it had sold through 18.5 million PS4s to consumers after a little over a year on shelves, while Microsoft said it was on the verge of shipping 10 million Xbox Ones to retailers just a couple months earlier.

That gap didn't seem to be getting any narrower, and in 2015 Microsoft stopped reporting console hardware sales entirely.

While Microsoft still isn't reporting hardware sales and retail charts indicate the PS5 is still in the lead, the Xbox Series X|S has been doing respectably and even managed to outsell its rival here and there while the new systems were still supply constrained.

The pandemic has kept willing customers from buying the hardware and delayed a swath of the software

Speaking of those supply constraints, the pandemic behind them absolutely shaped the first two years of this console cycle, from keeping willing customers from buying into the new machines to delaying the arrival of some high-profile system sellers. And since the shortages kept the installed base of next-gen systems down, we've seen more cross-generation titles as companies have been more reluctant to go all-in on the new machines.

QUOTE | "You can't build a community of over 110 million PS4 owners and then just walk away from it, right? I think that'd be bad news for fans of PS4, and frankly not very good business." PlayStation Studios head Herman Hulst explaining in 2021 why the previously announced PS5 God of War and Gran Turismo titles would also receive PS4 versions.

So perhaps it doesn't feel like we're that far into this console cycle because the next-gen hardware still looks out of place sitting on a store shelf instead of flying off it, and we haven't seen nearly as much next-gen-exclusive software as we normally would have at this point.

STAT | 4 – The number of times games exclusive to the PS5/Xbox Series X|S generation appeared in the NPD's Top 10 monthly best-sellers chart over the entirety of 2022.

STAT | 36 - The number of times games exclusive to the Xbox One/PS4 generation appeared in the NPD's Top 10 monthly best-sellers chart over the entirety of 2015.

In 2015, there was a feast of generational exclusive content at least making a cameo in the Top 10 charts

Yes, there are extenuating circumstances here. The Switch ate up a lot more NPD chart real estate in 2022 than the Wii U and 3DS did in 2015, so that will keep the more recent numbers down a bit. And from what I understand, moving a game between the PS4 and the PS5 is not the challenge that moving a game between the PS3 and something designed with human developers in mind would be. So in some ways, the deck was always going to be stacked against the 2022 figure there.

Still, four games?!? Over the course of the year, there were 120 Top 10 spots on NPD monthly best-seller charts, and generational exclusives only managed four of them? And half of those were taken up by Gotham Knights? (The other two were The Last of Us: Part 1 in September, and Need for Speed Unbound in December.)

In 2015, there was a feast of generational exclusive content at least making a cameo in the Top 10 charts. Bloodborne! Batman: Arkham Knight! Mortal Kombat X! Halo 5 Guardians! The Witcher 3! Star Wars Battlefront! Rory McIlroy PGA Tour? [double checks] Huh. OK then, Rory McIlroy PGA Tour.

I suspect Sony and Microsoft are both reluctant to push new hardware out anytime soon, partly because they know they can get more mileage out of the original boxes and partly because there are a lot of players who just recently secured one of these latest-and-greatest systems and they would be understandably irritated if the new hotness they finally landed suddenly became the old busted option.

Besides, what would new systems right now really be offering? The Xbox One X and PS4 Pro had an easy-to-grasp mass market selling point in 4K support for games (and Xbox One X could also play 4K Blu-ray movies, which is what pushed me over the edge into a purchase). And as much as the PS5 and Xbox One Series X were sold with the usual array of tech jargon and promises of opening up new possibilities for developers, we've barely seen anyone actually take advantage of it yet.

No, not at all

That last point is interesting to me, because I don't necessarily know if the lack of a compelling selling point for mid-cycle refreshes is going to change in the next few years.

It's already so expensive and time-consuming for developers to take advantage of the hardware they have access to right now that I wonder how many of the bottlenecks they face in trying to realize their ambitions are going to be significantly addressed by newer, faster hardware. The abundance of cross-generation titles tells us that today at least, there are relatively few experiences that cannot be more-or-less replicated on decade-old hardware at this point.

Sure, new hardware can allow for more performant performance modes or more, um... resolute resolution modes, and perhaps even eliminate the need for players to pick one or the other. But when I think of who that will sell an expensive new console to, I generally think of people who can increasingly scratch that itch on the PC side, particularly with Microsoft's embrace of the platform for its first-party titles and Sony even starting to bring its key system sellers over to PC, albeit belatedly.

And if we are at the point of diminishing returns on the power we can put into consoles, perhaps it behooves Microsoft and Sony to skip the "refresh" idea and just move to a new generation five or six years down the line instead. Given the more PC-like architectures both companies have embraced and the likelihood that will help backward compatibility become a standard feature going forward, maybe console generations become more of a marketing exercise and an opportunity to periodically refresh the brand rather than a hard cut between different product lines.

The extended lifespans we saw from the last two generational cycles were weighed down by waning consumer interest at the end

The mid-cycle refresh of an Xbox One X or a PS4 Pro helps extend a console generation by a few years, sure, but the extended lifespans we saw from the last two generational cycles were weighed down by waning consumer interest at the end. Moving to shorter console cycles could help minimize that malaise. And if the difference between console generations is going to be less significant going forward, do you really want half-step hardware dragging generations out for multiple extra years anyway?

On top of that, one of the big selling points for a console is that everything just works. So if you're going to do a refresh instead of a full generational leap, you can't leave your early adopters behind. This is an issue for Microsoft in particular, as the Xbox Series S is less powerful than the Series X and that's already causing issues for developers like Larian Studios, maker of Baldur's Gate 3. Last week the company announced release dates for every version of the game except the Xbox version, which it can't commit to yet because the Series S is having issues handling split-screen multiplayer and Microsoft insists on feature parity to the same standard before the game can ship.

A more powerful Xbox Series console could still benefit game performance, but how many games will really be able to take advantage of it when they're going to be limited not just by the Series X's capabilities, but those of the Series S as well?

Yes, ASAP

Okay, this one feels like going straight chaos mode to me, but what's the argument for rolling out a mid-cycle refresh now?

I noted above that Microsoft got us started on this refresh thing with the Scorpio announcement at E3 2016, but the Xbox One X didn't actually come out until November of 2017, four years after the original Xbox One launched. Sony lagged in revealing the PS4 Pro but actually got it on shelves first, announcing it in September of 2016 and launching it that November.

Even though Sony was clearly in the driver's seat last generation, it was still committed to a mid-cycle refresh after just three years

So even though Sony was clearly in the driver's seat last generation, it was still committed to a mid-cycle refresh after just three years.

If the company stuck to that cadence, that would put a PS5 Pro debut sometime this holiday season. And if Sony needed a selling point for such a product – I say this with tongue just barely in cheek – a vastly reduced footprint like the Xbox One X offered compared to the original Xbox One would be one of those sneaky appealing features, like a handheld gaming system that's 15% lighter so when you inevitably drop it on your face while in bed, it hurts 15% less. (It's still 100% as embarrassing, but I suppose there are some problems technology simply cannot solve.)

I imagine PSVR 2 could also benefit more appreciably than standard PS5 games from any improvement in hardware specs. Given the importance of frame rates in VR, I think we're further away from the point of diminishing returns on horsepower there.

So there's a possible explanation for why in the world Sony would want to trot out a PS5 Pro now, but what about Microsoft? Well for one, Microsoft has been talking about throwing the traditional console generation model into the scrapheap for a while now.

QUOTE | "At Xbox, we want to deliver a world where you have more freedom and choice to play the games you want, with the people you want, on the devices you want. A world where you can play without boundaries, a world beyond generations." – Xbox head Phil Spencer, detailing the company's new vision at E3 2016, just before the reveal of Project Scorpio.

Granted, that was almost seven years ago and plans change. For example, a few moments later Spencer was talking about how Scorpio "must deliver true 4K gaming and high-fidelity VR," but Microsoft never did bring VR to Xbox. (In 2019, Spencer explained the decision not to pursue it, saying "Nobody's asking for VR.")

But let's say Microsoft has kept to the "world beyond generations" vision. The Game Pass subscription service and its cloud streaming offerings certainly suggest Microsoft still wants to move beyond console hardware, which would be tough to do if you weren't also moving beyond generations.

Console generations represent the status quo in gaming, a status quo that has benefitted Sony tremendously to date

And really, console generations represent the status quo in gaming, a status quo that has benefitted Sony tremendously to date. If Microsoft is to ever gain the edge over Sony in the long-term, it needs to outflank it instead of hoping that a period of strong execution on the Xbox front overlaps a period of Sony inexplicably shooting itself in the foot, as with the early 360-PS3 era. And maybe the most likely way to outflank Sony is to play the disruptor and shake up parts of the business model Sony is going to be reluctant to tamper with, much in the way Microsoft has added first-party games to Game Pass on day one while Sony has balked at anything comparable for its subscription service.

So maybe the traditional console cycle is just another piece of the status quo that has to go. Roll out new hardware every couple of years and force PlayStation to participate in a costly arms race or accept a reputation as the less powerful console. Microsoft is no stranger to losing money in its quest to conquer the console space, so what's another few billion down the hole? If any of the bean counters at Microsoft get upset, just remind them of how much money Meta's wasting to corner VR and you'll look like a genius by comparison.

For the record, I do not buy this argument at all and I don't get the sense that anyone is craving a mid-cycle upgrade from Microsoft or Sony this year, but who knows? Maybe Spencer just wants to watch the world burn.

I suppose, ultimately, all I can do is shrug my shoulders and say, "Time will tell."

The rest of the week in review

STAT | 2 – The number of major regulatory hurdles remaining in front of the Microsoft-Activision Blizzard acquisition, if a report this week that the European Commission will likely allow the deal to go forward is accurate.

STAT | 2 for 8 – In the Activision Blizzard acquisition case before the FTC, Sony objected to eight parts of Microsoft's subpoena for internal documents, and won on just two of them. However, its request to withhold PlayStation content licensing agreements from Microsoft was only denied in part, so the Xbox maker will only get to look at contracts signed since 2019, instead of those since 2012 as was originally requested.

QUOTE | "A cosmetics-based, free-to-play game, while it's really appealing to us as gamers, requires massive scale to be economically sustainable. It's sort of an all-or-nothing thing, which is a dull view of the world in a sense because it's like if you want to do something creatively new, it can't be the right set up in that business model unless you can imagine it being enormous." – In an in-depth interview about why Knockout City is being shut down after two years, Velan Studios co-founder Guha Bala explains the tension between creating something innovative and creating something that doesn't have exploitive monetization.

QUOTE | "We definitely are still in this 'raising tide helps all ships' mindsets for the VR ecosystem, so it's not the same kind of competitive landscape as it is, say, in the console space, kind of 'flat' gaming experience." – Sony Interactive Entertainment's Shawne Benson explains the company's third-party portfolio strategy, and why its deals on the VR front aren't created with an eye to compete against Meta the same way PS5 partnerships are designed around "making PlayStation the best place to play" over other consoles.

QUOTE | "Bigmode is the only publisher with Biggy the frog." – Bigmode co-founder Leah 'Leahbee' Gastrow jokingly answers the question of what the indie publishing label brings to the table that the abundance of other indie publishers don't. She then mentions her co-founder Jason Gastrow (better known as Videogamedunkey or just Dunkey) as a more serious answer.

You might not like Dunkey as an answer but at least it's actually something other indie publishers can't claim to have. I've spoken with plenty of indie publishers over the years and asked that same question about what sets them apart to just about every one of them. I don't think I've ever received a really good, convincing answer. I don't know how you're supposed to make indie games you work with stand out from the flood of options on the market when you can't articulate how your own business will stand out from its own competition.

QUOTE | "I'm disappointed that the majority of companies failed to address some of our most urgent questions, including providing us with their policies around extremism, as well as transparency reporting around these topics." - US Representative Lori Trahan (MA-03) wasn't happy with the responses she received from major industry players to her inquiries into the rise of extremism in online gaming spaces. Not a great look for the industry that these publishers seemingly decided ignoring those simple questions was a wiser course of action than telling the politician what they're actually doing to prevent extremism from spreading through their online communities.

QUOTE | "Jo will be a hard act to replace and follow but this is an exciting juncture for UKIE and the industry." - UKIE chair Tim Woodley says the trade group has started a search for its next CEO after Jo Twist steps down this summer, ending her 11-year run atop the organization.

STAT | $167,000 – Roughly the amount of money Yuji Naka made through insider trading he admitted to this week.

STAT | 14 – The number of BAFTA award nominations raked in by God of War Ragnarok. Stray received eight nods, while Elden Ring is up for seven awards.

QUOTE | "So certainly, burning people out or grinding them down is the wrong thing to do long-term. It's not how you build a business. And as an industry, we're terrible about it. We burn our people out. We burn our best people out faster. And as an industry, if we're going to continue to grow, we have to stop it. We just have to stop doing it and make better choices." - Telltale Games CEO Jamie Ottilie says the company has delayed The Wolf Among Us 2 to avoid crunching staff.

QUOTE | "Given the length of the development cycle with Beyond Good & Evil 2, the Montpellier development team is undergoing well-being assessments through a third-party for preventative measures and to evaluate where additional support may be needed." – Ubisoft responds to Kotaku inquiring about Ubisoft Montpellier in the wake of managing director Guillaume Carmona's exit and an investigation from French labor regulators over an "unprecedented number" of developers burning out and taking sick leave.

STAT | 3 – The number of new VR headsets Meta is planning to introduce in the next few years, according to an internal company roadmap reported on by The Verge.

STAT | $14 billion – The 2022 operating loss of Meta's Reality Labs division, which is working on its VR, AR, and metaverse ambitions.

QUOTE | "The real big difference from years past was the cost of installations, and with the CPI going up so much the math around return on investment just wasn't working. Until that fundamentally changes, we don't believe it's prudent for us to invest significant dollars into new game development." – Mobile game maker Playtika explains why it is no longer making new mobile games.

QUOTE | "One thing we know about hot marketing terms is that some advertisers won't be able to stop themselves from overusing and abusing them." – The FTC puts companies on notice that it will be scrutinizing how AI is marketed.

STAT | 200 – The number of QA staffers at EA's Baton Rouge office that were laid off this week.

QUOTE | "Overwhelming" – The word used by an external firm to describe the evidence against a former Nordic Game staffer who was accused of eight instances of sexual misconduct. The firm corroborated five of the accounts with witnesses and screen captures of chat messages that detailed "persistent and unwelcome comments or messages of intimate or sexual nature" and "intrusive and obviously violating physical touching of a sexual nature."

A current Nordic Game staffer was also accused of misconduct by three women, but the firm said it could not corroborate those accounts. It did not detail the accusations against the current staffer.

STAT | 1 – The number of quarters Unity has posted an operating profit (on a non-GAAP basis) over its entire history, thanks to its Q4 2022 results. That's a step in the right direction, but I'm still wondering how much longer we'll have to wait to see a net profit.